The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

A Bahamian realtor yesterday estimated that the collapsed FTX crypto currency exchange spent $250m and “probably more” on acquiring New Providence real estate, adding: “It was great while it lasted.”

Ryan Knowles, of Maison Bahamas Real Estate, told Tribune Business the company’s spectacular implosion in little more than a week had not cost local realtors “any deals” because what some have described as a $300m buying spree had already finished.

The latter valuation was placed on FTX’s Bahamas real estate purchases during yesterday’s Delaware Bankruptcy Court proceedings, although no documents or other evidence were provided to support this figure. An earlier Reuters report said the crypto exchange had spent $121m on 19 separate New Providence property acquisitions in the 14 months since it first arrived in The Bahamas.

The first court hearing into FTX’s collapse also saw the Bahamian provisional liquidators for its local subsidiary, FTX Digital Markets, agree to transfer their bid for legal recognition in the US from the southern New York district to Delaware. The latter state is where 134 other entities that made up the crypto exchange’s group have been placed into Chapter 11 bankruptcy protection.

The transfer does not yet impact efforts by Brian Simms KC, the Lennox Paton senior partner, and PricewaterhouseCoopers (PwC) accounting duo Kevin Cambridge and Peter Greaves, to obtain Chapter 15 recognition as a “foreign main” insolvency proceeding from the US courts or their application for “emergency relief”.

The battle as to who controls and leads FTX’s winding-up, and the efforts to secure and realise assets - whether it is The Bahamas or Delaware - will have to be determined at future court hearings. The provisional liquidators could not be reached for comment before press deadline last night.

Meanwhile, Mr Knowles said FTX ‘s presence had provided a major activity boost for the high-end residential and corporate markets in western New Providence despite its relatively short existence here. “They had a very significant impact based on how much they spent and how quickly they spent it,” he told Tribune Business.

“It wasn’t just the total dollar amount, but it was the velocity at which they were spending money to acquire properties in prime communities and also select communities. All that money was concentrated in two or three select communities. Albany and Old Fort Bay were the main ones. They bought the property where they were going to do the headquarters [Bayside Executive Park], and they bought some units in One Cable Beach.

“It was all in the west, and 80 percent of it was in the communities you just named [Albany and Old Fort Bay]. They were definitely a large player in the market. Two hundred and fifty million dollars was the number they invested; that was the number out there. It’s probably going to be more than that,” Mr Knowles continued.

“You’re going to have a major impact on an island as small as New Providence. Not only were they buying; they were leasing a lot of places, so there will be fall-out on the lease side as well. They leased a number of units in One Cable Beach, which I’m personally familiar with. They were leasing a house on Love Beach as well, a house I look after. They leased that for a while at a very high rate.

“The money was flowing. It was great for the market while it lasted and we’ll have to see how it shakes out. Hopefully there won’t be too much fall-out. The fundamentals of our market are still very strong and there’s huge demand from all over the world. Crypto is a small piece of the economy. Maybe there will be some opportunities on the rental side seeing that some properties will come back on the market because they were leased.”

Mr Knowles’ assessment was echoed by fellow realtor Matt Sweeting, broker at 1 OAK Bahamas, who told Tribune Business that FTX’s Bahamian real estate acquisitions were “merely a drop in the luxury market bucket” when compared to its overall size.

“I don’t think it’s going to have a substantial effect when you look at the kind of real estate that is,” he said of the crypto exchange’s travails. “It’s at the high end. This is a market that most realtors don’t get to play in. There were some condos at One Cable Beach, multi-million properties at Albany. Again, this isn’t like this is going to have a considerable effect on the local real estate market.

“It’s merely a drop in the luxury market bucket. I don’t think we’re going to see any considerable effect on high-end real estate, and it’s highly likely those properties will be tied up in the liquidation for a long period of time. If we do see some effects, they’re likely to be delayed due to the liquidation.”

Tribune Business was previously shown a report, which checks confirmed was genuine and had been well-researched, disclosing that FTX has acquired some $74.23m in west New Providence real estate during 2022 alone. Most of these purchases involved property in the high-end Albany community, along with the acquisition of units in the Veridian Corporate Centre, which was developed by Island Luck gaming tycoon, Sebas Bastian.

The acquisitions by FTX Property Holdings, the crypto exchange’s real estate arm, ranged in value from a high of $30m to $8.9m, $7.479m, $7.311m, $7m and $6.75m at Albany, according to the report, which was being widely circulated on social media. Some $4.5m was also spent to acquire the Bayside Executive Park site for its planned $60m headquarters, which is now almost certain not to proceed.

The report also showed a $2.29m purchase at the Veridian Corporate Centre. “The corporate offices for FTX are currently housed at the Veridian Corporate Centre, which was originally built and sold by Sebas Bastian,” the document said. “These are not rentals or leases. FTX has purchased these units outright. Additionally, there is one purchase of a condominium at One Cable Beach for $2m made by Sam Bankman-Fried directly in late 2021.”

Robert J. Ray, the chief executive for FTX Trading and the entities covered by the Delaware Chapter 11 filings, alleged last week that corporate funds belonging to the crypto exchange were used to fund Bahamian real estate purchases by its executives who then put the properties in their own, personal names rather than the company’s.

“In The Bahamas, I understand that corporate funds of the FTX group were used to purchase homes and other personal items for employees and advisors. I understand that there does not appear to be documentation for certain of these transactions as loans, and that certain real estate was recorded in the personal name of these employees and advisors on the records of The Bahamas,” Mr Ray asserted.

Mr Knowles, meanwhile, said the greatest Bahamian impact from FTX’s implosion will be felt by its 40 local staff who will likely have to seek fresh employment. Besides the loss of potential opportunities and reputation damage for the jurisdiction, others who will be hurt include Bahamian suppliers of goods and services to the crypto exchange who will either have lost a valuable revenue source, be owed monies they cannot fully recover, or both.

“The impact is more on the investments side of things,” the realtor said. “They were going to build a hotel, big commercial centre, invest a lot more money in the local economy; not necessarily real estate because they’d bought all the real estate they needed.

“The jobs impact is the biggest I can see so far. All the good young Bahamians working for FTX in the crypto space will be unemployed. They may have had a good career ahead at FTX and now will have to regroup and figure things out. For us it’s a big shock, but to them it’s an even bigger shock for sure. The biggest fall-out from this is the loss of opportunities and jobs.

“The real estate market will be fine,” added Mr Knowles. “It’ll absorb whatever comes on the market, but that has to go through liquidation and the courts and it may be years before that happens. Who knows what the condition of the market will be then? As far as I can see, all is not lost. People want to buy, be here and put down roots. People forget there’s so much legacy wealth not affected by events such as this......

“I don’t think we lost any deals. They [FTX] had bought as much as they were going to buy. They’d stopped buying, and on the leasing side it’s an opportunity for folks to get units they couldn’t get previously because there was no inventory for a while. We might see some cooling-off of rents because they were pushed to an all-time high, definitely helped by FTX.”

Mr Knowles said rental rates were also increased by persons coming to The Bahamas to stay for one to two years during the COVID-19 pandemic, as they sought to escape more crowded city destinations in their home countries.

Meanwhile, Sam Bankman-Fried, FTX’s co-founder and chief executive who steered the crypto exchange to its collapse, was yesterday said to have run the operation as his “personal fiefdom” with virtually no checks and balances to his powers, minimal corporate governance practices and little to no internal controls on cash management and other aspects critical to the operation of an entity once said to have been worth $32bn.

A “substantial amount” of FTX’s assets “have either been stolen or are missing”, James Bromley, co-head of the restructuring practice at law firm Sullivan & Cromwell, told Judge John Dorsey at yesterday’s Delaware Bankruptcy Court hearing. “FTX was in the control of inexperienced and unsophisticated individuals, and some or all of them were compromised individuals.”

Mr Bankman-Fried remains holed up in his Albany marina penthouse, no doubt hoping to evade media interest, with his parents - both professors at Stanford University - said to be present with him. The Securities Commission, FTX’s primary Bahamian regulator, meanwhile said it had obtained a Supreme Court Order allowing it to recover the costs it incurred in securing FTX Digital Markets’ remaining assets.

Fearing these were about to be hacked, the regulator had previously obtained the Supreme Court’s permission to transfer them to a digital wallet under its control for safekeeping. “On November 21, 2022, the Securities Commission obtained an order from the Supreme Court to secure a right of indemnity and right to be reimbursed for expenses reasonably incurred by the Commission in connection with the regulatory action taken to safeguard the digital assets of FTX Digital Markets,” it confirmed in a statement.

The Securities Commission said it “determined urgent action to safeguard the digital assets of FTX Digital Markets for the benefit of its customers and creditors was needed, and directed the transfer of certain digital assets to a digital wallet controlled by the Commission.

“The Order secured today confirms the Commission is entitled to be indemnified under the law, and FTX Digital Markets [the liquidation estate and creditors] shall ultimately bear the costs the Commission incurs in safeguarding those assets for the benefit of FTX Digital Markets’ customers and creditors in a manner similar to other normal costs of administering FTX Digital Markets’ assets for the benefit of its customers and creditors.”

The Supreme Court, though, will have to approve any costs payment.